Rouble Crash Hits Markets, but India Story to Continue in 2015: Sanjeev Bhasin

Indian stock markets should stabilise over the next few days after a roller-coaster week saw currencies, stocks and bonds suffer from the crash in Russian rouble.

Global investors are still reeling from the risk contagion in Russia, where the rouble went in to a free-fall in the week to December 19. The Russian central bank spiked its interest rate to 17 per cent on Monday (December 15), but that did not prevent the rouble from sliding over 20 per cent on Tuesday. More comprehensive measures to support the rouble were announced two days later.

As the rouble sank below 80 against the dollar, the shockwaves whipsawed to CEEMEA bonds, particularly Kazakhstan, Turkey, Croatia, and Serbia, as well as African sovereigns, with some bond traders drawing parallels to the 2008 debt crisis.

In India, the rupee hit its lowest level in 13 months, sinking to 63.89 per dollar in intra-day trade, but had recovered to 63.29 by the end of the week. The Nifty tested levels of 7,961 before recovering sharply on Thursday and Friday, and ending the week at 8,225.

Foreign investors turned sellers as exchange traded fund redemptions plus collateral global losses saw equities being dumped across the board. Domestic buying did emerge and salvage the situation to some extent; however, it was the Federal Reserve which calmed markets.

The Fed said it will be "patient' about raising rates in the US, a statement interpreted as dovish by economists. The US central bank's lifeline led to a sharp rebound in markets.

The Dow Jones index had its best 3-day rally since 2011.

Technically, the Nifty has seen a sharp rebound from 8,000 levels and faces resistance around 8,250. Any close above the same should see a rally up to 8,400. The high beta 'Bank Nifty' performed better and ended the week up 1 per cent.

The outperformer for the week was the CNX IT index, up 2.26 per cent, and the CNX Energy, up 1.63 per cent, while the underperformance came from the CNX Realty, down 5.34 per cent, and the CNX FMCG, down 5.25 per cent.

Hcl Tech, up 5.1 per cent, BHEL, up 4.7 per cent, and HDFC, up 4.2 per cent, were the top three Nifty gainers, while, DLF, down 13.2 per cent, ITC, down 6.8 per cent, and HUL, down 5.3 per cent, were the top three losers.

Despite recent correction, investors appear ready to bet even on counters that are fairly valued given the long-term growth potential of stable companies.

The week ahead should see local volatility rise as the expiry of derivative contracts takes place on Thursday. However, with aggressive buying by insurance major LIC and mutual funds should see foreign selling get absorbed comfortably.

Investors would be well advised to put cash to work as the fear factor which has gripped the markets is more external. Domestic markets may continue to gain amid persistent weakness in crude oil prices.

India is set to be the global choice of consensus investment for 2015.

Sanjeev Bhasin is an independent market analyst. The opinions expressed here are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability or validity of any information given here. All information is provided on an as-is basis. The information, facts or opinions appearing on the blog do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.